Donnerstag, April 28, 2011

How To Destroy An Economy...

Here's a case study.

Consider a country that has a divided school system. All children go to elementary school through the 4th grade. Based on grades, a teacher's assessment of the child's natural abilities, as well as discussions with the parents, children are the sent to three different types of schools: the clever ones are sent to a school designed to turn them into well-educated, widely read young people who, basically, reflect the top 25% of the country's potential; the bright ones, but with little ambition or from blue-collar families, go to what amounts to a trade school, learning the proper  tools to run a business or become an electrician (math, physics, but not much in the way of literature analysis); the third group goes to a school that is designed to churn out low-level employees such as retail sales people, gas station attendants, that sort of group, this time the lower 25% or so of the country's potential. That middle group is, of course, the larger of the three, with around 50%.

Those going to the clever schools overwhelmingly go on to proper universities, or enter management apprentice programs. Those going the bright schools go into all sorts of apprentice programs, and have a university path in fields such as engineering and other applied sciences. The others go out and get jobs, either directly or after a training period.

That, in a nutshell, is how the German schooling system works. First and foremost, it does recognize that there are differences in intelligence and that there are differences in social origin that can make or break individuals, and for all its flaws - and believe me, after putting my children through that system, there are many - it works well for Germany. You learn at an early age that choices made, right or wrong, have real-world implications down the road. You learn, as well, that you can surmount those decisions, but it takes hard work - transferring from the lower 25% to the upper 25% is not unheard of, but you have to prove to the system that you belong elsewhere - and is something that people respect and can be proud of. Muddling through lands you down at the lower cohort, but even someone not terribly gifted can, by dint of hard work and perseverance, can succeed. Children, of course, from wealthy families can afford to have tutoring to get them through the rough patches, and families with little money will struggle, but it's for a good cause: getting your Abitur - it is roughly the equivalent of an Associate Bachelor's degree in the US, i.e. high school + 2 years of college - means that you have, effectively, been approved by society as being someone who has passed the first test of becoming a productive member of society.

Now, there is one area in Germany that has been spectacularly successful over the last 50 years: Baden-Württemberg, the south-western corner of Germany. It's where Porsche and Mercedes call home; it's where the largest and most successful engineering firms are located; incomes are high, culture is good, life is well organized (there are rules about when you must sweep your sidewalks) and the virtues of the "Schwäbische Hausfrau", or Swabian Wife, are well known. It's a very self-satisfied area, rightfully so.

Now that there is a green-red coalition (German political parties go by a color in the normal vernacular: the Greens are the ecological party, the Reds are socialists, the Blacks are christian conservatives and the Yellows are a kind of liberal) running things in Baden-Württemberg, they have started the discussion about abandoning the three-tier system for a single school system.

In other words, they want to deconstruct exactly that system that has been a major contributor to the success of the German economy.

This is how you destroy an economy in the long run: dismantle the school system in the name of an illusionary system that "is more equal", forcing the bright and clever ones to be bored while pretending those left over are overwhelmed and frustrated. The Green-Red coalition was voted in - the coalition came after the election, not before it - after the Fukushima accident in Japan made the pre-nuclear policies of the blacks unacceptable for many swing voters: a protest vote, fundamentally, that now gives the more radical amongst the greens their opportunity to change how the country is run.

They are going after the school system first, as it is one area where they can simply make it so.

What is it with modern educators? They are sacrificing methods and systems that work in the search for something that is, purportedly, better: however, empirical evidence shows that these sorts of changes makes things worse, rather than better, but too many careers, I suppose, and too much professional status is involved for anyone to admit that the kids are worse off, rather than better.

This is how you destroy an economy: make sure the kids don't get an education that means anything. Make sure they know about gay history and how capitalism is bad, but not how to write something that people actually can understand or do their sums correctly. It takes a while, but it does explain how so many in the pedagogic business are on the political left.

Mittwoch, April 27, 2011

Still missing the point...


I guess I'm blessed by not having to watch shows like this, as the righteous ignorance would drive me up a wall.

The price of oil is a function of market prices: supply and demand.

Nothing more, nothing less. Oil is, for the purposes under consideration here, fungible: there are several key places where the oil prices are recorded, from oil from the North Sea to Saudi Arabia to Siberia. Oil prices have futures because companies want to lock in supplies and prices for business purposes.

The price of oil, as a function of supply and demand, is dependent on both supply and demand: if supplies are tight, prices go up. Right now, supplies are not tight.

It's a function of demand. The world is, economically speaking, no longer a duopoly - the US and the EU - but has added a major player in terms of oil demand: Emerging Asian countries, largely India and China, but also including a slew of countries that are starting to transcend poverty.

Hence, Whoopie: you're pissed that a bunch of Chinese and Indians are using the oil that you want to use. To adopt her vernacular: Get used to it, Girl.

She asks the question "Why are they doing this to us?"

The answer: they aren't doing that to you. They're just doing it.

And Jim Avila: "There is really no rational reason for the prices to be so high"? Really? That's your answer? Take a look at world demand patterns and don't tell me there's no rational reason for the prices to be high.

Guess what: they're not going to go down. Too much international demand. The days of cheap oil - and I remember filling up a 20 gallon tank of gas for what it now costs per gallon ($5), back around 1974 - are long, long, long over. Get used to it.


Supply and demand: it's not just a good idea. It's how the world works.

Dienstag, April 26, 2011

Why does this not surprise me?

One of the basic tenets of law is that there is no such thing as guilt by association. In other words, if your sibling goes on a murderous rampage, you won't get the electric chair (unless, of course, you were helping them load). In much the same manner, if your boss is embezzling money, you won't go to jail as a result.

Or if someone in the company broke the law on their own initiative, the man running the company isn't blamed for breaking the law. He gets blamed for having bad judgement, perhaps, or for not having adequate and feasible checks and balances to prevent criminal behavior.

Unless, of course, you are the CEO of a drug company. Then you have to resign if your company wants to keep on doing business with the government.

Read this.

Key quote:

The Health and Human Services department startled drug makers last year when the agency said it would start invoking a little-used administrative policy under the Social Security Act against pharmaceutical executives. This policy allows officials to bar corporate leaders from health-industry companies doing business with the government, if a drug company is guilty of criminal misconduct. The agency said a chief executive or other leader can be banned even if he or she had no knowledge of a company's criminal actions. Retaining a banned executive can trigger a company's exclusion from government business.

Hmmm. Let's parse that one: someone in the company broke the law, the company accepts responsibility and is convicted of criminal actions. Even if the CEO knew nothing about this, they can be banned.

Just like that.

Why does this not surprise me?

Well, apparently this policy existed but, as the article said, wasn't used much. But apparently now the Obama Administration is now making, basically, the hiring decision of who gets to run drug companies.

Key further quote:

The new use of exclusion is meant to "alter the cost-benefit calculus of the corporate executives," said Lew Morris, chief counsel for the Department of Health and Human Services's inspector general, in congressional testimony last month.

In other words, HHS makes the assumption that corporate executives of drug companies base their operative decisions not on things like market needs and profitability, but rather based on what they can get away with.

Why does this not surprise me?

Again, this is not refusing to do business with someone convicted of doing something, but rather a refusal to do business with a company unless they fire their CEO because someone else at that company broke the law and was convicted for it, and the implementation is left up to the government to decide.

Why does this not surprise me?

Respect for the law and due process don't really seem to mean much to the Obama Administration these days (if ever).

Belated but not forgotten...

Well, it turns out that WikiLeaks is having some ... unexpected results.

Read this.

There is a mythology on the anti-war left that the Bush Administration made up a connection to Al-Qaeda in order to sell the war to the American public. The only problem is that the Bush Administration never said that: there was an active connection: Vice President Cheney came closest when he said that the two had cooperated.

As always, the reality is a tad stranger than one imagines. Sure, there was no inked treaty of cooperation between the two. But neither did the Bush Administration make something up. The idea that politicians in the Arab world may do one thing in public and another in private may be difficult to accept, but it is reality; further, there is nothing contradictory in the fact that Al Qaeda was sponsoring anti-Saddam forces in areas that Saddam no longer really controlled (Kurdish folk didn't like either) while at the same time discussing operative cooperation with Saddam.

Welcome to the world of Arab politics. Nothing is as it appears, your worst enemy becomes your long-time best friend, and everyone is fully able to hold multiple, contradictory viewpoints all at the same time because that is how the world works there: it's tactical thinking from those whose only interest is survival and advancement.

The anti-war left was and is extraordinarily naive when it comes to such politics and how they, the anti-war left, were deliberately misled, manipulated and in some cases killed when it served the purposes of their erstwhile friends in governments, local NGOs (got news for you: any NGO in Arab countries cannot exist without being a pawn of the government, sometimes more obviously so than others, but no NGO can exist in these countries without being compromised).

The American public believed, back then, that there was a connection. The Bush Administration did not dissuade them of this notion, for it was, as far as anything can be true in that corner of the planet, the case. It never existed as the prima causae belli in anyone's mind except for the rabid anti-Bush left.

Donnerstag, April 14, 2011

An Informed Electorate...

While the vote in the US doesn't happen for another, oh, 572 days, there is no time like the present for prospective voters to start informing themselves on the issues.

These two links (Part I here and Part II here) are from a fairly unlikely source: an Australian journal called Quadrant, which bills itself as a "journal of ideas, literature, poetry and historical and political debate".

Normally you'd expect modern orthodoxy from such a source, but the links take you to a sensible argument that AGW is, bluntly, a crock and really bad science masquerading as scientific orthodoxy and mainstream thought.

What is disappointing is that you have to go to Australia to get this sort of writing. The US press, the mainstream media (MSM), is failing in one of its self-anointed tasks: of helping people make an informed choice when they vote. The dogmatic orthodoxy that you see in the MSM does exactly the opposite: those who vociferously complain about the ignorance and stupidity of the average American voter are the same people who created the problem.

An informed electorate is the last thing the Left want, as maintaining the Left's myths and fairy tales require a significant lack of intellectual curiosity - a closed mind - and adherence to an orthodoxy that has never had anything to do with the empirical world.

Which is probably exactly why you have to go to Australia to get this sort of writing.

Donnerstag, April 07, 2011

A Shrug: Return of the Railroad...

Odd title at first, but bear with me.

Starting in 2013, new energy laws come into effect in Germany, requiring companies within an industry to meet "best-of-class" energy targets or be required to buy emission permits to offset the fact that they do not meet best-of-class energy usage.

The problem?

It will drive key industries, those making energy-intensive products, into a corner where they can either close down, move production outside of the Euro-Zone, become uncompetitive or go out of business because profits won't finance the cash flow needed to invest.

The problem? Defining best-of-class energy usage for the industry as a whole.

Simply put, the EU is set to introduce benchmarks that certain key industries cannot meet. Not "can't afford to" or "is unwilling to" or "doesn't want to", but rather can't. The currently planned benchmark means that no open-furnace steel maker anywhere will be able to meet the benchmark as it is not technically possible to do so.

Either the companies can close their operations down and leave the business, or they can move production outside of the Euro-Zone and ignore the energy targets entirely, or they can pass the emissions permit costs on to their customers (driving their prices up and becoming, given the fact that competitors don't have to do this) and become uncompetitive (and hence leaving the business at some point via bankruptcy), or they can eat the costs, which will, however, be so high that they will no longer be able to finance investments out of their cash flow. The amount of money involved is not trivial (and comes out of profits): it will be hundreds of millions of Euro for Germany alone.

This isn't just the case for steel: it is also the case where electricity is one of the raw materials used in manufacturing, not merely used to light things and run computers. The largest PVC production plant, for instance, uses 800 GW-Hours in a year, about as much as fair-sized city: it is not technically possible to make it any other way.

We're not talking old, inefficient plants, either: these are the most modern around. The increases in prices due to the emission permits means an additional tax, as it is that, of around €15k per worker in 2013.

And possibly more.

The problem here is that politicians are making decisions that industry has to live with, but without understanding that at least some of the decisions are simply not technically possible. Not that they aren't feasible, or cost too much, or take too long to implement, but rather that there is simply no way to bend the laws of physics and chemistry to meet those goals.

So why the title?

Consider this: the industries involved (concrete, chemicals,, glass, metals and paper) are core primary industries. They feed into all other industries. Without their production, nothing else can be made.

What we have here is tragedy masquerading as policy. In the name of the greater good, functioning, efficient and profitable industries will be destroyed based upon the whim of politicians who should know better.

It is what happened in Ayn Rand's novel, Atlas Shrugged. If you have read that, you know how it ends. Substitute primary industries for the railroads, and you end up with the same story line.

If you haven't read it: worth the read. It's not the best economics, nor is much the story entirely plausible (railroads aren't that critical given the highway system and air transport), but it does contain a message worth understanding: beware the takers, beware those who are willing to destroy for the greater good.